The Dow jumped 2.5 percent, climbing 253.16 to close at 11,119.86. The tech-heavy Nasdaq gained 75.86 to 4,940.61, and the Standard & Poor's 500 index added 26.81 to 1,527.35.
The CNET tech index rose 59.01 to close at 3,517.44, led by shares of Microsoft and Cisco Systems.
Winners and losers were balanced, with 49 of the 100 stocks in the index falling, 49 rising and two remaining unchanged.
Of the 18 sectors tracked, PC software companies posted the sharpest gains, rising 5 percent. Computer-aided design and manufacturing firms were the day's largest losers, falling 2 percent.
Intel dipped $1.44 to $142.63. Microsoft climbed $8.63 to $111.88 after reports indicated a settlement in its antitrust suit with the government was becoming more likely.
The initial offering of Breezecom, a wireless products company, was the biggest percentage gainer on the Nasdaq. The shares jumped $19.81, or 99 percent, to $39.81. Volume topped 5.6 million shares.
Among members of the CNET tech index, 3Com and Cisco posted strong gains.
Cisco rose $5.62, or 7 percent, to $77.81, and recorded the largest volume on the Nasdaq with 76.9 million shares changing hands. With the rise, Cisco's market capitalization surpassed Microsoft.
Shares of 3Com rose $5.81 to $69.69. The company recently announced restructuring plans.
Compuware fell $3, or 11 percent, to $24.25 as analysts at Donaldson Lufkin & Jenrette Securities cut their rating on the company.
The Philadelphia semiconductor index fell 19.47 to 1,285.12, led by Micron Technology, which lost $6.44 to close at $134.56.
Disney is approaching members of Congress in an attempt to spark further scrutiny over the proposed merger between America Online and Time Warner. The company's shares rose $1.06 to $41.56; shares of AOL fell $1.13 to $70.88, and Time Warner fell 25 cents to $101.